States Opting Out of Medicaid Expansion Could Reduce Their Rolls Without Consequences

Phil Galewitz of Kaiser Health News sketches out a terrifying scenario for Medicaid in states that opt out of the expansion. Not only could they refuse to cover low-income adults up to 133% of the federal poverty line, but they could actually roll back their current Medicaid plans without any consequence. In 2014 the “maintenance of effort” rules expire for Medicaid, meaning that states could actually make their plans stingier. And don’t think that budget-conscious states won’t kick the poor before, say, raising taxes on corporations or the wealthy.

This wasn’t supposed to happen under President Barack Obama’s health law, which was designed to expand coverage for 30 million Americans, in part by adding 17 million people to Medicaid. But the impact of the Supreme Court’s ruling last week making the expansion voluntary is likely to be compounded by another provision in the law that the justices left intact: In 2014, states no longer are barred from making it harder for adults to qualify for Medicaid.

Experts worry that those two developments taken together could spur some states to reduce the number of people covered […]

As a hypothetical example, if Mississippi opted out of the 2014 expansion of Medicaid, poor childless adults wouldn’t gain coverage in that state. At the same time, the state could roll back eligibility for parents with children who are currently enrolled, reducing the number of participants in the program.

State officials haven’t talked about cutting Medicaid eligibility since the decision. But in the last several years, many have sought to reduce the cost of the program by cutting providers’ rates and contracting with private managed-care companies, among other strategies.

I remember Medi-Cal cuts in California that simply added more bureaucracy to the process to make it harder for recipients to maintain enrollment, with the hopes that they would give up or forget a form and then get dropped. We could certainly see something like that come about, and it would be much easier to accomplish without the maintenance of effort regulation.

We keep seeing these shortcuts come up with the Affordable Care Act, where this one tweak to Medicaid from the Supreme Court ruling has multiple consequences. Already, low-income adults under the poverty line were never given the opportunity for subsidies, because it was assumed in the law that they would get Medicaid. So they exist in this black hole, where if their state opts out, they cannot get Medicaid and cannot get subsidies to purchase insurance on the exchange. Now it turns out that, thanks to the expiration of the MOE requirement, states can dump more people into this limbo, creating more low-income uninsured.

There’s yet another incentive, and here’s where Douglad Holtz-Eakin is right, for states that already serve Medicaid recipients at 100% of the poverty line to cut it off right there:

The federal subsidies are available for those with incomes from 100 percent of the federal poverty level ($23,050 annually for a family of four) to 400 percent ($92,200 for a family of four).

States would have an incentive, then, to set eligibility for Medicaid at 100 percent of the poverty level – rather than at the law’s 133 percent (about $31,000 for a family of four) – to minimize their financial exposure.

Pushing people just over the poverty level into the federal subsidy program could be enticing for cash-strapped states, said Douglas Holtz-Eakin, the president of the conservative American Action Forum and a former director of the Congressional Budget Office.

The feds pick up 100% of the subsidies, and only 90%, over time, for Medicaid. So it is a simple math equation.

The Affordable Care Act was so precariously balanced, and more to get a good CBO score than for good policy reasons, that kicking out any leg of the stool creates hazardous outcomes with the wrong kind of incentives. That’s what we’re seeing now in the wake of the Medicaid ruling.

States Opting Out of Medicaid Expansion Could Reduce Their Rolls Without Consequences

Phil Galewitz of Kaiser Health News sketches out a terrifying scenario for Medicaid in states that opt out of the expansion. Not only could they refuse to cover low-income adults up to 133% of the federal poverty line, but they could actually roll back their current Medicaid plans without any consequence. In 2014 the “maintenance of effort” rules expire for Medicaid, meaning that states could actually make their plans stingier. And don’t think that budget-conscious states won’t kick the poor before, say, raising taxes on corporations or the wealthy.

This wasn’t supposed to happen under President Barack Obama’s health law, which was designed to expand coverage for 30 million Americans, in part by adding 17 million people to Medicaid. But the impact of the Supreme Court’s ruling last week making the expansion voluntary is likely to be compounded by another provision in the law that the justices left intact: In 2014, states no longer are barred from making it harder for adults to qualify for Medicaid.

Experts worry that those two developments taken together could spur some states to reduce the number of people covered […]

As a hypothetical example, if Mississippi opted out of the 2014 expansion of Medicaid, poor childless adults wouldn’t gain coverage in that state. At the same time, the state could roll back eligibility for parents with children who are currently enrolled, reducing the number of participants in the program.

State officials haven’t talked about cutting Medicaid eligibility since the decision. But in the last several years, many have sought to reduce the cost of the program by cutting providers’ rates and contracting with private managed-care companies, among other strategies.

I remember Medi-Cal cuts in California that simply added more bureaucracy to the process to make it harder for recipients to maintain enrollment, with the hopes that they would give up or forget a form and then get dropped. We could certainly see something like that come about, and it would be much easier to accomplish without the maintenance of effort regulation.

We keep seeing these shortcuts come up with the Affordable Care Act, where this one tweak to Medicaid from the Supreme Court ruling has multiple consequences. Already, low-income adults under the poverty line were never given the opportunity for subsidies, because it was assumed in the law that they would get Medicaid. So they exist in this black hole, where if their state opts out, they cannot get Medicaid and cannot get subsidies to purchase insurance on the exchange. Now it turns out that, thanks to the expiration of the MOE requirement, states can dump more people into this limbo, creating more low-income uninsured.

There’s yet another incentive, and here’s where Douglad Holtz-Eakin is right, for states that already serve Medicaid recipients at 100% of the poverty line to cut it off right there:

The federal subsidies are available for those with incomes from 100 percent of the federal poverty level ($23,050 annually for a family of four) to 400 percent ($92,200 for a family of four).

States would have an incentive, then, to set eligibility for Medicaid at 100 percent of the poverty level – rather than at the law’s 133 percent (about $31,000 for a family of four) – to minimize their financial exposure.

Pushing people just over the poverty level into the federal subsidy program could be enticing for cash-strapped states, said Douglas Holtz-Eakin, the president of the conservative American Action Forum and a former director of the Congressional Budget Office.

The feds pick up 100% of the subsidies, and only 90%, over time, for Medicaid. So it is a simple math equation.

The Affordable Care Act was so precariously balanced, and more to get a good CBO score than for good policy reasons, that kicking out any leg of the stool creates hazardous outcomes with the wrong kind of incentives. That’s what we’re seeing now in the wake of the Medicaid ruling.